How to Check if a Loan Company Is Legitimate

How to Check if a Loan Company Is Legitimate

How to Check if a Loan Company Is Legitimate

Business loans can be vital to growing your business. But you want to be careful when shopping for a business loan, as there are plenty of scammers who are out to take advantage of business owners they think might be desperate. As a result, it’s important to know how to check if a loan company is legitimate. Here are some tips to help you spot potential red flags.

Common Types of Loan Scams

There are two common types of loan scams you’ll want to watch out for. (Both personal loan scams and business loan scams often operate in a similar fashion.) They are:

  1. Advance Fee Loan Scams. Here, loan scammers will promise a loan but will require money upfront to either pay for “insurance” or to make a few payments up front to “demonstrate good faith,” They will typically require these payments to be made with a gift card or prepaid card— either by asking you to mail them the card, or more commonly to read the information from the card to them over the phone. 
  2. Phishing scams. In these scams, someone tries to get you to reveal sensitive information in order to provide you a loan. The loan never materializes but you or your business becomes a victim of identity theft.

Either can be devastating financially. Running a business is stressful enough without falling for a loan scam!

What Are the Warning Signs of a Business Loan Scam?

There are warning signs that you may be dealing with a loan scammer rather than a reputable lender:

Requires an upfront payment. Scammers may insist you send them money before you get the loan funds. In some cases there may be legitimate upfront fees for a loan (such as an appraisal for a commercial mortgage) but in most cases these fees are bogus attempts to steal your money. The scammer will usually require you pay by a method that’s difficult to trace and impossible to refund, such as wire transfers or prepaid cards. 

Requests personal information but is not secure. This one is tricky because loan applications with legitimate loan companies often will require you to provide a Social Security Number (SSN) for a personal credit check and/or an Employer Identification Number (EIN) or Taxpayer Identification Number (TIN) for a business credit check. (If you are monitoring your credit reports, you’ll see an inquiry from the company that checked your credit on one of your credit reports.)

Your bank account information may be required either to verify revenues or to facilitate ACH payments. It is essential that when you are asked to provide personal information make sure you are dealing with a reputable company and using a secure website. (See tips below.)

Loan approval regardless of credit. Scammers will often say you are approved for a loan even though you have a bad credit score and don’t meet normal qualifications. Most lenders will have some basic creditworthiness requirements, whether that’s based on personal and/or business credit. While there are some types of small business financing available to business owners with poor credit, there is often a higher cost associated with these options.

Excellent loan terms for a new or struggling business. Most business loans require a combination of strong revenues, at least 1-2 years in business and/or good credit. If you have none of these qualifications it is unlikely you will qualify for most types of small business financing. If someone calls you and promises financing at very low interest rates regardless of your qualifications, you may be dealing with a scammer.

How to Check If a Loan Company Is Legitimate

There are several ways to check if a loan company is legitimate. First, check out the loan company on the Better Business Bureau (BBB) website. Do a quick online search and look up online reviews from independent companies like Trustpilot, if possible.

Finally, check with your state’s attorney general to find out if there are complaints, or if the company is not registered as required.

Before you apply with a lender, think about these steps to make sure you don’t get caught up in a scam.

1. Check for an online presence

Before you do business with an online lender, do an internet search for the company name. (Tip: Try the “news” tab in google to see if the company has been mentioned in news articles.)

But don’t assume a professional-looking website alone means it is legitimate. Also if the company reached out to you (versus you reaching out to them), you could be talking to a scammer who is impersonating a legitimate company.

You can also look up the domain name registration to see when a website was registered. This may help you spot a site that is brand new and may have been created for unscrupulous purposes. 

Loan brokers and loan companies must be registered in certain states. If they are, they will list that license information on their website. Look for it, and when in doubt, verify it. 

Most importantly, before you enter any information on an online lender’s website, check for a padlock in the URL to make sure the site is secure. You can then click on the padlock to see if the security certificate is up to date. 

Pro tip: Never enter personal information or sensitive business information on a website that is not secure! 

2. Look for signs of phishing.

If you receive information by email watch out for misspelled words, either in the email or in the email address. Hover over the email address to see if it’s as represented. If the email address is generic (like @gmail.com) you are very likely dealing with a scammer.

3. Research the business location

Look under the website contact information for a physical address, then look that address up on google maps. You may be surprised how many of these searches result in a residential home address or a business that has nothing to do with lending! If the only address is a P.O Box, make sure you do additional research to verify the company is legitimate. You can also do a reverse search on the phone number calling you.

4. Check with the Better Business Bureau

Even if the loan company has an online presence, that doesn’t necessarily mean that its operations aren’t predatory. Check the Better Business Bureau website to learn more about whether the lender is worth working with. You’ll typically see a letter grade from A+ to F, along with reasons for the grade.

In some cases, you’ll also be able to read customer reviews, which can give you a better idea of what to expect. If you find that the lender wouldn’t be a good fit, you can also use the website to find one that might be a better one.

5. Do a gut check

Lenders want your business, but they shouldn’t be desperate for it. If you feel like the person you’re dealing with is overly aggressive or manipulative, it might be a sign that they’re trying to fluster you and make you feel like you need to make a decision before you get all the facts.

If you feel uncomfortable about the process at any time, take a step back and consider why you feel that way and whether you should continue.

It’s very hard when you’re desperate for a loan to pass up what may feel like your only opportunity to get one. But if you’re feeling uncomfortable, it may be because you know something isn’t right. Take time to do some research, especially if you risk losing money in the transaction.

6. Check with regulators

If most everything checks out, but you want to be entirely sure, contact your state’s attorney general office or the state attorney general’s office in the state where the business is located. The Consumer Financial Protection Bureau may be able to help too. Lenders and loan brokers are often required by law to register with state agencies before they can do business there.

Who Is at Risk of a Loan Scam?

The more desperate you are to get financing quickly, the more you will be a target for predatory lenders or scams. You’ll need to be especially careful if you are looking for: 

  • A debt consolidation loan because you are falling behind,
  • A bad credit loan because your credit history is not good,
  • A large loan amount with minimal qualifications, or
  • A business loan even though you’ve been turned down by multiple lenders.

That doesn’t mean you can’t find a loan but you must be very careful not to get taken in by a scam. 

Warning: Watch out for loan offers that are too good to be true!

How Do I Know If a Loan Company Is Scamming Me?

In addition to taking the above steps, there are some other small things to think about as you learn how to check if a loan company is legitimate. Here are some questions and answers to help:

Do Loan Companies Ask for Money up Front?

Some lenders charge what’s called an origination fee to process your loan. However, this fee is typically deducted from your loan disbursement. Legitimate lenders don’t ask you to pay the fee directly before you can get access to your money.

Watch out for requests to pay an “insurance” fee or to make several payments upfront in advance of getting the loan. These are typical requests from scammers. They want you to pay them before you get your loan.

Do Loan Companies Ask for Bank Login Info?

In some cases, a lender might ask for your bank account number to know where to send the loan funds after your application has been approved. Some online lenders may ask you to connect a business bank account to analyze and verify your revenues to see whether you qualify for an online loan. In those cases, make sure you are dealing with a legitimate lender and a secure website. 

Watch out for scammers looking to get access to your account to make a withdrawal or transfer to their own account.

How Do I Know if a Financial Institution Is Legitimate? 

In the US, national banks and federal savings associations are chartered and regulated by the Office of the Comptroller of the Currency. You’ll find a list here. 

Stated chartered financial institutions will be registered through state licensing agencies. For example, the Michigan Department of Insurance and Financial Institutions’ Office of Banking oversees the safety and soundness of Michigan’s state-chartered banks, savings banks and Business and Industrial Development Companies (BIDCOs). 

Legitimate financial institutions and business credit card issuers won’t call non-customers, offer a loan and then request personal information. If you get a call from someone stating they are from a lender or credit card company, be careful, especially if you aren’t a customer. Tell whomever is calling that you’ll call the financial institution using contact information provided on their website. 

How to Find Fake Loan Apps 

Fake loan apps are designed to gather personal information and scam individuals looking for loans. When discovered, these apps may be taken from app stores, but the scammers may try to create a new version. That means you must always be very careful about apps you download the permissions you give them. Here are a couple of sources for lists of fake loan apps:

But just because a suspicious loan app doesn’t appear on one of these lists, that doesn’t mean it’s legitimate. Be careful.  

How Do I Spot Personal Loan Fraud?

Some personal lenders will allow you to use personal loan funds to start or fund a business, but there are also plenty of scams to watch out for here. In general, you can use the same steps as you would with a business lender to find out if you are presented with a legitimate personal loan offer.

Are Bad Credit Loans Legitimate?

There are several legitimate business lenders who specialize in working with borrowers with bad credit. In most cases, those lenders will base their decision on your verifiable business revenues and will require at least a year in business. Take your time when comparing bad credit business lenders to make sure you not only avoid scams but also improve your chances of getting favorable terms on your loan.

What Do Lenders Require to Get a Business Loan?

To get a “real loan” from a small business lender or financing company, your business will likely need to meet at least two of the following qualifications. 

  1. Creditworthiness: Good to excellent personal credit scores and/or business credit scores often required, though not always.
  2. Time in business: 2+ years in business is preferred by most lenders. Although some lenders are willing to work with businesses that have been around for six months or more.
  3. Revenue: Lenders often have minimum income requirements and will require verification.
  4. Type of business: Lenders commonly have lists of industries they will or won’t lend into. 

If you don’t meet some of those requirements, you or your business will likely need to meet other qualifications. In other words, a business with bad credit, few revenues and/or in an industry that is difficult to fund because it is considered risky, will likely have trouble getting funded. They could be vulnerable to scams. 

Where Can I Get a Business Loan If I Don’t Qualify?

If you are having trouble qualifying for a small business loan, there are legitimate resources that may be able to help:

SBA resource partners like SCORE or your Small Business Development Center provide free mentoring services to entrepreneurs. 

Your accounting professional can help you evaluate your business cash flow and financial situation.

Nav can help you understand your credit, as well as how lenders view your qualifications for a loan. 

Where Can I Report a Loan Scam?

The first place you should report loan scams to us local law enforcement. If they cannot help, try your state attorney general, the Consumer Financial Protection Bureau (CFPB) and/or the Federal Trade Commission (FTC).

The Bottom Line: Loan Scams

If you’re trying to get capital to grow your business, you need to know how to check if a loan company is legitimate. It can save you from losing money and, potentially, your business.

As you consider these tips and learn where to look to compare legitimate lenders, you’ll be able to get the help you need without being worried about getting taken advantage of.

This article was originally written on April 3, 2019 and updated on January 10, 2024.

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102 responses to “How to Check if a Loan Company Is Legitimate

  1. I was contacted by a loan office after doing an online loan application. The loan office requested my bank account, routing number, and password. They’re wanting me to receive a deposit by electronic deposit lesser than what was requested. Then send it back through cash app using Bitcoin (to build my credit). Then said they will send the original amount I requested.

    1. I don’t know how that type of payment could build your credit. I am not aware of those types of payments being reported (or reportable) to credit. I can’t say whether it’s legit or not, but please be careful.

    2. same exact thing happened to me just last week exactly as you said, so now I ended up calling the bank even though they put the check through I called the bank and said this doesn’t seem right and needless to say I open $400 so I hope nobody else gets caught up in this and it was called something lenders

  2. hello i am dealing with a lending company name SHEE SHYAM FINANCIAL SERVICES located in india i just want to know if this company is legal or fake? i already check their domain name and its registered,thank you

    1. Unfortunately we can’t comment on specific lenders. We hope the tips in this article will help you make your own determination. You can always check your financing options in Nav to see what’s available there.

  3. I just don’t understand how places banks, credit unions, and high interest lenders make their decisions. All of my accounts are in perfect standing. I recently had an unexpected reduction in income and forsee having issues keeping everything in good standing. Trying to be responsible, a consolidation loan makes perfect sense. We aren’t talking a large loan 5,000. Consolidation would save me hundreds a month. What do they see as a risk? I am so depressed and frustrated. I’m definitely not a quitter but I can’t handle more no’s.

    1. This same thing happened to me today im supposed to give them back the money prepaid card im wondering is this legit??

  4. Would a real lender company ask u for ur bank login info an password before to verify ur account ? If there a real lender company they should only need ur routing an account number correct?

    1. Some lenders use third party companies to link a bank account to verify revenues. When that happens it goes through a secure service like Plaid or Yodlee. If a lender is asking for your bank log in information over the phone or by email I’d be very concerned.

    2. I got scammed this way, what they did was ask for my login info And when I gave it to them they wrote or deposited a check which happened to be from a stolen account I’ll still in checkbook and they were going to just send their money to themselves as a good faith trick.

  5. But your company is asking for an upfront of 39850 and is stated here that no original loan lenders ask for an upfront

      1. I’ve never had a loan before so Im not sure how to verify any of that. Have u ever heard of west side lending or lenders

      2. Hi good day!
        I haved seen a lending company named geeyook services which is base in turkey.,. I try to applied for a loan they emailed me that im quality to apply for a loan..
        After 2 days they send me a loan agreement that i need to be signed to my loan will be transfer in my account, but before they proceed for the transfer i just need to pay an insurance fee that cost 7,082..
        Just wanna ask if this is legit company.
        Thank you very much..

    1. Legitimate loan companies do typically require proof of the owner’s identification for compliance reasons. Make sure you feel comfortable with the lender you’re dealing with before you share personal details.

  6. I got a dm saying I won an opportunity for a ppp loan and wants my bank password and transit number is that a scam?

      1. I applied a personal loan in one company and it is approved then, the company asked me to pay the insurance fee and loan vat. It is necessary to pay the insurance fee and loan vat before the loan amount release? The company located in metro politan italy.

          1. I am approved for a secured loan of $12,500. I have been asked to pay $705 to as the security for the loan which is equivalent to 3 payments. Is this a legitimate ask?

          2. I can’t say for certain but I’d recommend you be very careful. Asking for payments up front before you get the loan is a common tactic from scammers. Also if a loan is secured that would mean putting up the amount of the loan (or close to it). Three payments upfront does not make a loan of that size secured in any traditional sense.

      2. I applied a personal loan in geeyook inc. last july 2021 and according to them my loan was already insured but untill now i did not pay the International monetary fund in order to transfer my loan amount. Untill now they are waiting for my monetary fund to pay by me in order to transfer my loan into my account. My query is it can be a legitimate or not? They are not make me hurry to pay the said payment.

        1. I can’t comment on a specific lender and I don’t know this one. But generally upfront payments are a big red flag. I’d be concerned you may be throwing good money after bad. Please do more research and consider reaching out to local law enforcement before you send any more money.

          1. Where and how in South Africa can I check whether the loan company is an Accredited and legitimate Credit provider

    1. I applied for a loan online with Marrsby Loan Services. I got approved for a $5000 loan and they asked for $450 collateral payment. I sent the money. and broker told me the funds where released and would be sent by etrasfer. it’s been 2 days now.
      just wonder if this company is legit.
      I tried calling the number but I can’t get a hold of anyone it keeps going to voice mail.

  7. I was pre-approved for a loan and they sent me the check . I haven’t deposited it yet because I haven’t been sure if it was legit or not but I have until the 24th. How do I know if it’s a secured loan and if the loan company is legitimate

    1. Good day Jerome

      I have applied as well and they suddenly quiet.
      Please advise if you got your loan from them or is it a scam

  8. I’m interested in trying to find out if united loan network is a legitimate loan company

    1. United Loans from New York said I was approved for loan, I live in Oklahoma and I was wondering if this business is legit?

  9. A company name lending club said I was approved but they had to send a small amount to my account n send it back to boost my credit. They also asked for my bank login info is this legit

    1. I’m not clear what’s happening but please be sure you are talking to Lending Club and it’s not someone pretending to be Lending Club. I’d suggest you to to the Lending Club website and reach out to them directly. Scammers will sometimes use the name of a legitimate lender.

  10. I’m new to this so Lending club asked me for my online bank information like username and password, is this the usual information needed?

    1. How did they ask Trish? Over the phone? If so that could be a red flag. I’m not sure what you’re dealing with but please be sure you are talking to Lending Club and it’s not someone pretending to be Lending Club. I’d suggest you to to the Lending Club website and reach out to them directly. Scammers will sometimes use the name of a legitimate lender.

    2. I got a phone call 7.11.22 saying I was approved for a grant. Didn’t give name of company or state. She talked with a very thick accent. She wanted my debit card number and I gave it to her which I’ve regretted ever since. She said they hold out $5.87 from my account and would be added back when I got my money. How do I get it stopped and fixed where they can’t get money out of my checking account

    1. Luis – we can’t vet lenders for you but we hope the tips in this article will help you do your own research to determine if you are dealing with someone legitimate.

  11. Is it normal for a CashNetUSA loan officer to ask to deposit money into the account from an atm from the bank but not from the lobby???? I’m negative $60 in my account. He wants me to deposit $20 then take a picture from the receipt and send it. I changed my log in info and password just in case it’s a scam.

  12. I had a “loan company” identifying himself as David Barker from Loan Net USA. He asked for my bank account, routing number, my debit card number, my security code on back of my debit card and my online bank user id and password. Said he was going to put a undisclosed amount in my bank account and he would call me, to verify what the amount was. This was to verify my identity and the account is mine. I would then send this back to loan company. I was to answer the phone when he called back. And any other lenders. I needed to hang up on. I had given my info already when he started talking about this amount for verification! I was worried it was a scam, so I went and changed my password to my online bank account. Can they still use my account? Do I need to close the account?

    1. I have been contacted numerous times by a lending group saying that I was approved for a $5,000 personal loan. They assured me that they were with the better business bureau and the company is a legitimate company but I have been asked to provide my online banking login information and other personal information. They knew all my information that I used to request the loan online but I don’t understand why they would need access to my account like that. I told him I had issues with the process and giving up my personal details to a unknown person on the other end of a phone call. I just don’t want to get into something that I Will regret later. They told me the monthly payment of the loan and the 10% APR. AND he said that I could even clear out my account first to be safe. Is there any way to make sure that they are real or a scam. A question that is a 4sure sign that they can’t be real of they answered me wrong. Thanks

      1. I personally would not provide my personal information to someone who called me out of the blue guaranteeing a loan at a low promised interest rate. Please be careful.

  13. I received a call from a company for my loan approval. They were asking my phone banking user id and password ? Is it genuine or a fake call ?

  14. I had a lady call and say I was approved for a loan she wanted my social security number my debit card verification number and my goggle verification from phone number 6469924478 is this normal

      1. Sorry if I did this incorrectly but I have spoken with several hopefully”legit lenders”. I keep running into the same issues. If all I have is All the mobile bank accounts like NetSpend, Green Dot, PayPal, Go2bank Brinks etc but technically I don’t have a”real” bank account like with Bank of America, or Wells Fargo and places like that. Is there anyway they could still be legit if they are asking for me to pay a $50 state to state transfer.?????

        1. Kacey – I really can’t say what may or may not be a legitimate fee in each instance. I am not familiar with a state to state transfer fee unless it’s a real estate fee. The best I can do is suggest you follow the tips in this article to do your own due diligence.

    1. I was approved for a 3000 dollar loan from this company. I talk to this person from the company and everything is going great. But at the end he tells me that the need me to get a ebay gift card and load 150 dollars on ot which is the amount of the monthly payment and nobody will take money off of it. And at the end of the loan when I’m done paying the loan back they could help me get that money rerturned. Scam or no

  15. Hi I’ve just apply for a loan and they ask for my ID number, my bank account number, my routing number, my social security number. Etc. Is it safe to give it?

  16. I have person who say i was approved for loan. Say only way for me get the loan is need boost my credit. Only way boost my credit them put money in my account boost my credit then pay them back in gift card. Then I’ll get loan that true

    1. I wouldn’t recommend it Cici. Paying someone by gift card gives them untraceable funds. It sounds like a classic loan scam. You would be much better off putting that money toward a secured credit card.

      1. I applied for a loan with a company but they ask that I send 502.00 for insurance and attorney fees. The 502.00 must be from a bank or post office. Could this still be a scam?

  17. I have a lender that seems legitimate. But because of my credit they want 3 months of payment first and then I’ll receive my loan. And that she’ll have me the contract before I pay any money. She also gave me a few other options like a cosigner with a credit score of 800, a car or house for collateral. Or pay 3 months payment of 450 which my monthly payments would be 150 a month. And then I would receive the loan. Does this sound legit or a scam? I need help

      1. I have a company called Quick Cash Financials that say I’m approved for a 5k loan with an interest rate of 8.5%, and say my payment will be $250.00 for 24 months. But before they can transfer the money they need my sign in for my bank account, just seems very strange to me.

        1. Hi Sharon, it’s not uncommon for lenders to make an ACH deposit of funds into your account rather than cutting you an actual check. With that in mind, it’s fair to ask them why they want access to your bank account.

        2. Whatever became of this? these same guys just sent me an email with a very juvenile looking loan agreement

  18. Ben I work as a commercial loan broker. There is a common misconception that lenders should not ask for money up front. If they do they are scammers. Lenders must perform their due diligence which includes ordering appraisals, surveys, environmental reports, title searches among other third party reports. Legal expenses must also be paid to draw up loan documentation. If the lender is not in the same city or state as the collateral property they must travel to it therefore travel expenses are incurred. Are you suggesting all of these costs are to be absorbed by the lender? If lenders paid these costs out of pocket everytime they received a loan request many would be out of business. Don’t be naive and stop misleading people. There are very legitimate lenders who ask for these very reasonable costs from the borrower upfront. It is the responsibility of the borrower to perform their due diligence and make sure they know the value of their property and even order the necessary reports which lenders in some cases will update if they are recent enough. The other aspect to consider is the legitimacy of the borrower. It’s a two way street. Is the borrower serious? There are many tire kickers out there. I have seen them. Time wasters. They waste people’s time. They want 100% financing with absolutely no risk on their part. They’re not willing to put any skin in the game. Simply put they are looking for unicorns. I tell them this. I am very blunt and don’t waste time with tire kickers because many of them don’t have two nickels to rub together and yet want some lender to believe their business idea is the next best thing since sliced bread and just drop a bag a cash in their lap while wishing them good luck. It doesn’t work that way. Any serious sponsor with a loan request will get an attorney on board to review loan documents before signing anything or paying deposits to lenders. I for one encourage all borrowers I work with to review everything with an attorney before moving forward. I just wish this lie would not continue to be perpetuated. There are cost deposits lenders require which are perfectly justifiable.

  19. Ben,

    Owler and Crunchbase are not credit bureaus and both entities pull their data from user contribution and websites. most fraudulent companies have a website and will appear to be legitimate on Owler!